Case Law Details
Shri Jalendra Sahoo Vs ITO (ITAT Cuttack)
After hearing both the sides and perusing the entire material on record, we find that the assessee before authorities below has stated that on the amount tax has been deducted u/s.194H & 194D of the Act by Seashore Agricultural Promotion Company Pvt. Ltd. ,therefore, this is a non-salary income. It was found by the lower authorities that the assessee was working for Seashore Agricultural Promotion Company Pvt. Ltd and the salary as well as the alleged commission has been received by him during the normal course of working for Seashore Agricultural Promotion Company Pvt. Ltd. The CIT(A) found that the assessee himself in the return of income as well as the statement of computation filed during the course of appellate proceedings, has accepted that amount of Rs.7,50,000/- is the salary of the assessee. Therefore, the CIT(A) observed that relationship between Employer Company Seashore Agricultural Promotion Company Pvt. Ltd. and the assessee is in the nature of employer-employee relationship has been accepted. Ld. AR submitted before us that the salary and commission received from Seashore Agricultural Promotion Company Pvt. Ltd and Seashore Securities Pvt Ltd was not in the nature of salary but in the nature of business commission paid by the companies to the assessee for promotion of the business and intrinsically connected with the achievement of business by the assessee should have been considered. The remuneration was subject to achievement of target. Therefore, the said receipt in the hands of the assessee is business receipt and not salary as envisaged under the IT. Act, 1961. It is profits and gain of the business or profession which was carried on by the assessee during the relevant year and is assessable u/s 28 of the IT. Act and not salary to be considered u/s. 17 of the IT. Act, 1961. Further the ld. AR submitted that the staff were working for purchase of produce like rice, Mung Dal, Wheat, leaf for rope, coconut from farmers and supply them at cities like Bhubaneswar etc. and they are working for attracting investments in Seashore Securities Ltd. In turn the Company was invested in Floor Mill, Medicine Factory, Diary Farm, Cargoship, Preferential Shares and Dal Processing Unit to earn income so as to pay profit and dividend to the investor. These are nothing but business activities for which the assessee had to appoint staff and make expenditure under the above mentioned heads in Profit & Loss Account filed before the lower authorities.
From the assessment order, we observe that as the assessee could not substantiate its claim before the AO, therefore, the AO treated the commission receipt as income of the assessee from salary. The CIT(A) relying on the decision of Hon’ble Delhi High Court in the case of Kanwaljit Singh (2012) 28 taxmann.com 28(Delhi) upheld the action of AO. Before us, the assessee produced ledger account of staff salaries, meeting expenses ledger account, business promotion expenses ledger account, rent and electricity charges ledger account etc. In respect of computation of income submitted by the assessee before the revenue authorities, he has himself considered Rs.7,50,000/- under the head income from salary and rest amount has been taken as business income which is not accepted by the revenue authorities. Further the assessee has submitted profit and loss account in which he has shown commission received of Rs.11,12,211/- and in the debit side he has debited some expenses which has not been examined by lower authorities. We also noticed that the assessee has been issued Form No.16 for the salary received and Form No.16A for the commission paid to the assessee in which the applicability rate of TDS has been deducted. The assessee submitted before us copy of ledger accounts which has not been considered by the lower authorities. However, in our opinion, to arrive the correct profit from the above activity carried out by the assessee, the expenses need to be verified on the part of the AO. Therefore, this issue is sent back to the file of AO for verification of expenses debited into the profit and loss account. Needless to say that reasonable opportunity of being heard shall be given to the assessee and the assessee is directed to appear before the AO and cooperate in the assessment proceedings and he also directed to substantiate the expenses claimed with credible evidence before the AO. Accordingly, the issue raised by the assessee is allowed for statistical purposes.
FULL TEXT OF THE ITAT JUDGEMENT
This appeal has been filed by the assessee against the order of Commissioner of Income Tax (Appeals)-2, Bhubaneswar, dated 15.09.2016 for the assessment year 2010-2011.
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